What The New KiwiSaver Changes Mean For You
There has been a lot of talk this year about KiwiSaver. The Government is lifting contribution rates. National has announced a plan to take contributions even higher in the future. At the same time, more New Zealanders are struggling with their balances and many are stopping contributions altogether.
If you are in your 50s or 60s and starting to think seriously about retirement, this is a good time to pause and check that your KiwiSaver and wider investment plan are set up properly.
Here is a simple overview of what is changing and what actually matters.
Contribution rates are increasing
From April 2026 the default KiwiSaver contribution rate will go from 3 percent to 3.5 percent.
From April 2028 it will move to 4 percent.
Sixteen and seventeen year olds will also start receiving employer and government contributions if they are contributing. That pulls more young people into the system early, which is a good thing.
Putting more into KiwiSaver is helpful, but it is not the whole story. KiwiSaver is locked in until age 65, which is fine if you plan to retire at 65, but many people want options earlier. If you want the flexibility to slow down or retire before 65, you also need to be building investments outside KiwiSaver. A separate investment account gives you access to funds whenever you need them and helps you bridge the gap between when you stop working and when KiwiSaver becomes available.
National wants to lift contributions to 6 percent over time
National has said that if it forms the next Government, it will gradually lift both employer and employee contributions to 6 percent each by 2032.
Higher contributions can help people save more over a long timeframe. That part is positive.
The challenge is that KiwiSaver is still voluntary. Some people will stay on lower contribution rates. Some employers may move staff onto total remuneration packages. And without other changes, higher contributions simply mean more money being taxed each year inside KiwiSaver.
This leads to the real issue.
We should improve the tax treatment of KiwiSaver
If the Government truly wants people to save more for retirement, the smartest step is to improve how KiwiSaver is taxed.
Right now KiwiSaver is taxed at up to 28 percent on investment earnings. There is no tax relief when you contribute. The only benefit is that withdrawals in retirement are tax free.
Other countries give stronger incentives. Australia taxes super at 15 percent. The UK gives tax relief on contributions. The United States has retirement accounts that reward long-term saving.
New Zealand does not offer anything like this.
So when contribution rates rise, all that happens is that more of your income goes into KiwiSaver and gets taxed every year at the same rate. That is not a strong incentive to save.
A better system would include lower tax rates inside KiwiSaver or tax credits that reward people for contributing. These would make a bigger difference to retirement outcomes than simply raising contribution rates.
Global investments inside KiwiSaver are taxed heavily too
Another issue is how global investments are taxed.
Most overseas funds are taxed under the foreign investment fund rules. This means the IRD assumes a return of 5 percent each year and taxes you on that amount, even if the fund went backwards.
So you can be taxed on growth you did not actually receive.
Inside KiwiSaver this sits on top of the PIE tax that can be as high as 28 percent. This creates a lot of tax drag on long-term investing and makes it harder for people to grow their retirement savings.
Improving these rules would help people far more than higher contribution rates alone.
Many New Zealanders are not contributing
The latest report from the FMA showed that around 30 percent of working-age KiwiSaver members did not contribute anything last year. Hardship withdrawals have also increased, and many people are emptying their accounts completely when money is tight.
This shows that a lot of people still do not have a clear plan for their retirement. Even with rising contribution rates, the system will not work well if people are not investing in the right way or do not have a wider financial plan.
What this means for your retirement plan
Government policy will always change. What matters most is how you invest and plan for retirement. Here is what I help clients focus on:
Make sure your KiwiSaver is invested correctly. If your timeframe is longer than seven years, the right growth mix matters far more than whether you contribute 3 percent or 4 percent.
Review your contribution strategy. Increasing contributions helps, but you still need a plan that lines up with your retirement goals and modelling.
Consider a more flexible investment structure. For clients with larger KiwiSaver balances, using KiwiWRAP gives access to global shares, factor funds, commodities, or even bitcoin exposure if that suits your strategy. You get much more control than a standard Balanced or Growth fund.
Look at your whole financial picture. KiwiSaver is only one part of retirement planning. Cash, managed funds, property, and other investments all play a role. The goal is to make everything work together so you can retire with confidence.
Final thoughts
Lifting contribution rates is fine, but it will not fix retirement savings on its own. New Zealand needs better tax settings for KiwiSaver and for global investing if we want to help people save more.
If you are getting closer to retirement and want to make sure your investments are set up properly, I am always happy to help.